Elliott Hedge Fund Seeks to Challenge Buffett’s Bid for Energy Company – New York Times

The disclosures by Elliott highlight a brewing battle between billionaires. On one side is Paul E. Singer, the founder of Elliott, which began buying Energy Future debt last fall and now says it is the company’s biggest creditor with $2.9 billion in holdings.

On the other is Mr. Buffett, whose Berkshire Hathaway Energy emerged as the power company’s white knight after its nearly decade-long struggle to reorganize its finances.

Energy Future, once known as TXU, was taken private in 2007 for $45 billion in what was the biggest leveraged buyout ever at the time. But the ill-starred deal was struck at the beginning of the credit crisis, and the mountain of debt required to finance the transaction became a millstone around the company’s neck.

The company filed for bankruptcy in 2014 and has struggled to emerge amid disputes with creditors and Texas power regulators, who rejected two previous takeover bids.

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Now Elliott is pressing to halt Berkshire’s takeover effort, using its weight as a major creditor in an attempt to block the deal in bankruptcy court.

In the July 5 letter, Elliott officials complained to Energy Future that they had heard rumors of a potential deal with Mr. Buffett and demanded to have a seat at the negotiating table.

The hedge fund said in the correspondence with Energy Future that it intended to convert some of the debt it holds in the utility operator into equity and then team up with financing partners.

“We are extremely concerned that introducing a transaction with Berkshire at the current time will significantly undercut and potentially limit Elliott’s ability to provide a portion of the financing necessary to achieve the higher and otherwise superior transaction Elliott has proposed,” the Elliott executives wrote.

The hedge fund has argued that its potential restructuring plan would provide owners of some Energy Future debt with significantly better payouts than they would receive under other takeover offers. At the same time, it was willing to comply with any conditions that would be imposed by Texas power regulators.

Elliott has complained for some time that Energy Future declined to engage in talks over potential alternatives for reorganizing the company’s financing. The hedge fund sued in bankruptcy court in May to halt a takeover bid by NextEra, although ultimately the Public Utility Commission of Texas blocked that offer.

But while the hedge fund has talked with potential investment partners for an Oncor bid, according to people briefed on the talks, it is unclear whether it will put together a final proposal.